Mainland groups face 'Chinese buyer premium' in asset acquisitions abroad
Chinese firms will have to pay a premium for overseas acquisitions, a senior American mergers and acquisitions lawyer said yesterday.
'Chinese firms will make foreign acquisitions in a very broad range of sectors,' said John Lange, a partner in the Hong Kong office of Paul, Weiss, Rifkind, Wharton & Garrison, which served as counsel to PetroKazakhstan, bought last month by China National Petroleum Corp.
The first wave of foreign acquisitions was in natural resources and continues worldwide. 'This is going full-speed ahead in less developed countries. It will be difficult in the United States and less difficult in Canada and Australia,' he said.
Mr Lange said Chinese firms would have to pay a 'Chinese buyer premium', a higher price than buyers from elsewhere. 'This will apply in most places, less in developing countries than developed ones. It depends on the sensitivity of the industry and the labour unions involved - things that increase the execution risk for the seller'.
'But it will be worth paying if they want to enter the international market quickly. It is cheaper to buy an existing brand rather than build up their own,' he said.
Asked about the impact of the Sarbanes-Oxley Act on Chinese listings in the United States, Mr Lange said tougher corporate governance rules had made all foreign companies think long and hard before listing there.
